HK Stock Market Move | Zhongsheng Holding (00881) fell nearly 3%. UBS pointed out that the market has overvalued AITO stores.

ZHONGSHENG HLDG (00881) fell by nearly 3%, as of press time, it dropped by 2.27% to 17.28 Hong Kong dollars, with a trading volume of 38.1808 million Hong Kong dollars. UBS released a research report pointing out that after the announcement of the relevant strategy, the stock price of ZHONGSHENG HLDG has increased by about 40% or added 12 billion yuan in market value. The market believes that the valuation of AITO stores is too high. The report stated that ZHONGSHENG HLDG has signed a strategic cooperation agreement with Chongqing Sokon Industry Group Stock, aiming to operate Huawei AITO exclusive stores under an authorized distribution model, with the goal of starting operations in January next year. Management indicated that the commission rate for AITO cars is 4.5%, and the company will also provide related after-sales, auto finance, and insurance services. The bank pointed out that even with the contribution of AITO stores, it does not expect Zhongsheng's profits to rebound significantly. Retail discounts for the three major German car brands Audi, BMW, and Mercedes reached historic highs last month, indicating a decrease in the attractiveness of traditional luxury brands in China due to increased competition from Chinese brands and the aging of Mercedes-Benz and Lexus models. In addition, new energy vehicles have a long-term impact on the Chinese automotive aftermarket market, with the bank's research indicating that dealers and independent aftermarket service providers are affected, mainly due to a decrease in mileage for internal combustion vehicles. The bank expects Zhongsheng's aftermarket service income to grow in the single digits this year and in the future.